The big winners in an investment provident fund: Yellin Lapidot and Harel

The past year has only done well with provident funds. Despite the corona crisis and global economic fluctuations, provident funds have yielded decent returns. In the provident funds A significant number of routesHowever, most investments are grouped around the general track, which is a mix of government bonds alongside corporate and stock bonds and is considered relatively solid, and around another track that is becoming popular among investors – the stock track, which is mainly invested in stocks. The latter is exposed to fluctuations in the capital market, but on the other hand gives a high return. For example, Harel’s return on investment in the general track was 15.12% in the last 12 months, and Yellin Lapidot’s rose in the equity track to 26.02% in the last 12 months. To simplify the calculation, those who invested NIS 100,000 in Yellin’s share channel received another NIS 26,000, a handsome return by all accounts.


So what is an investment provident fund?

While bank deposits are raising dust due to zero interest rates, many are turning their backs on an investment provident fund, and not in vain. This is a financial device that creamed skin and tendons in late 2016 and currently manages about NIS 29 billion. The high returns of this financial instrument cause many who want to invest in the capital market without doing so independently, but by analysts and professionals, to turn to the investment provident fund. Yellin Lapidot gave a seal for this, and she has led the stock track in the last 12 months with a return of 26.02%, thus presenting to the general public a recommended and profitable alternative for those interested in investing in the capital market.

For most of us, the phrase “provident fund” will remind us of the financial device designed to save for retirement and which must be fined at the time of withdrawal, but here it is a whole world. While a regular provident fund allows withdrawal of funds only after at least 15 years or only at retirement age, the investment provident fund allows withdrawal at any time without penalty or taxation, except for capital gains tax on profits accrued in the fund beyond the original amount you deposited. This tax exemption will also be granted to those who have reached the age of 60 and have chosen to enjoy the money they have accumulated in the form of a monthly pension. It should be noted that the regulator has limited the amount of the annual deposit to NIS 70,913 in each calendar year (the amount is correct for 2021), and therefore the end of the year is a suitable time to deposit the balance of the maximum amount for those interested, or open an investment provident fund.

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The public flocks to the investment provident funds

The rationale behind the decision to make this device available to the general public is to encourage pension savings alongside financial education. The state wants citizens to save as much as possible for rainy days and times of crisis, and in addition they will increase their savings until retirement age. An investment provident fund allows several routes that can be switched between without taxation and for any period of time in which the saver is interested. The sheer liquidity and ability to invest in the short, medium and long term make the provident fund a preferred product over other alternatives as well, such as savings policies and mutual funds. No wonder, then, that the investment provident fund is perceived as a threatening product for the banks in Israel, where the money of many citizens lies in PKM. This is one of the reasons why if they initially considered allowing a deposit of hundreds of thousands of shekels at once Only per year, among other things to prevent a sudden transfer of hundreds of thousands of shekels from the deposits in the banks to the provident funds.

The last word on the amount of the annual investment has not yet been said, and in December 2020 the Capital Market Authority stated that they were interested in a reform in which the current ceiling would be increased by an annual deposit of NIS 200,000 to NIS 250,000 per year. Such a change would increase the threat from provident funds to their competitors, such as ETFs, mutual funds and savings policies, which also do not have an annual deposit ceiling. The average Israeli family can overcome the annual deposit ceiling by opening a provident fund for each member of the family – it is possible to open a fund in the name of each spouse and at the same time open provident funds for investment for children as well, thus maximizing investment in this unique device.

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Looking for an investment channel? Do your homework

When you approach a new financial instrument that you are not yet familiar with, it is always advisable to do “homework” and learn it by heart. It is the provident fund investor who decides in which route his money will be invested, and as a result also the level of risk and exposure to stock market fluctuations. The fund allows for a variety of routes, more or less solid, along with relatively low management fees, also in relation to savings policies, and serves as a savings channel for both individuals and households. Every citizen may open an investment provident fund for himself. An average Israeli family can hold several provident funds and thus also bypass the annual deposit ceiling, since it is possible to open a fund in the name of each of the spouses and at the same time open investment provident funds for children as well. If you have decided to open an investment provident fund and you are interested in knowing what the “reasonable” management fees are, then they stand at a rate of about 0.8%. With regard to the nice return of the provident funds since their establishment, these are very lucrative management fees.

Another advantage of the investment provident fund is the possibility of obtaining a loan for up to seven years and at a considerable rate of the amount accumulated in the fund. In general, the world of loans is not recommended for use except in emergencies only, and in such cases the investment provident fund is also available. This allows for a loan at a relatively low interest rate, while being flexible with the fund. Instead of breaking the coffers you can leave the money in the provident fund, continue to earn handsome profits, and his money you need to get as a loan on favorable terms.

In conclusion, the very fact that it is a financial instrument with great tax advantages and maximum liquidity puts the investment provident fund in a high place in the table of financial investment instruments offered to the public.


Source: Maariv.co.il – כלכלה בארץ by www.maariv.co.il.

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